Premium for conversion right An investor who purchases a convertible bond rather than the underlying stock typically pays a premium over the current market price of the stock Why would someone be willing to pay a premium to buy this stock? The market conversion premium per share is related to the price of a call option limit the downside risk of the convertible bond2 Premium for conversion right • An investor who purchases a convertible bond rather than the underlying stock typically pays a premium over the current market price of the stock. • Why would someone be willing to pay a premium to buy this stock? The market conversion premium per share is related to the price of a call option – limit the downside risk of the convertible bond